Should I buy Bitcoin? Is BTC a good investment?

Should you buy Bitcoin?

This is ultimately a decision that you will have to make yourself, and it would be wise to conduct your own research before making it. We’ll go into more detail later about whether Bitcoin is a good investment.

Your research should help you establish the fundamental value of Bitcoin and what gives it potential. As the original cryptocurrency, Bitcoin has a first-mover advantage. It is the cryptocurrency that is the most well-known, has the largest market capitalization, and is often the first purchase for new crypto investors.

Bitcoin’s potential has clearly been noted by institutions as well as retail investors. A number of large companies, trusts, and governments have started buying crypto, and Bitcoin is their starting point.

Bitcoin’s longevity and continued popularity are likely due in large part to its design, which was revolutionary when Bitcoin was created. The public distributed ledger makes the cryptocurrency accessible and transparent, while the consensus algorithm makes it secure. The predetermined, finite supply also protects Bitcoin from devaluation through inflation.

Your personal circumstances are also worth considering when deciding whether to buy Bitcoin. You should think about whether you have the spare capital to become an investor, whether you have the risk tolerance to invest in something so volatile, and whether you have the necessary skills and knowledge to invest the way you want to.

Is Bitcoin a good investment?

It is up to you to decide whether or not Bitcoin is a good investment, but the information provided in this section should help you come to your own conclusion.

It is a good idea to think about what affects the supply and demand of Bitcoin, as this is what decides its price. Considering whether and how these factors are likely to change in the future should help you decide whether Bitcoin is a good investment.

When it comes to supply, the maximum supply of Bitcoin is set to 21 million, and the amount of new BTC mined each block will halve approximately every four years until this supply is reached. With the vast majority of Bitcoin’s supply already in circulation, even a modest increase in demand could be good for its future price potential.

The demand for Bitcoin mostly comes from traders and investors, both retail and institutional. Over recent years, a number of companies have started adding Bitcoin to their balance sheets. As institutions have huge amounts of capital to invest, if this trend continues, it would mean both an increase in demand for BTC and a reduction in the supply available on the market, which could be positive for Bitcoin’s future price.

Reasons to Invest in Bitcoin

Potential for significant returns

The price of Bitcoin has risen from well under a dollar to tens of thousands of dollars, providing early investors with astronomical returns. During the most recent bull market, BTC price increased by about 1,500% in the space of one year.

These returns are far higher than what investors in traditional financial markets can expect. The volatility of Bitcoin means that a well-timed investment could provide a significant profit in a short period of time.

The price history of Bitcoin shows that long-term investors have been rewarded with even greater returns. As more retail investors discover Bitcoin and more institutions start buying it, this trend could continue into the future.

Accessibility

Investing in traditional financial markets can seem prohibitive to new retail investors. Opening a brokerage account may require a large amount of capital, and using a brokerage platform effectively may require getting to grips with a complex user interface, as well as a deep knowledge of finance or a financial advisor.

Meanwhile, crypto platforms have much lower requirements. The minimum deposit is often pretty low, and crypto platforms are generally designed to be easy to use, even for people who have never invested before. Platforms like eToro and Coinbase make it quick and simple for anyone to buy BTC in a couple of clicks. This is one of the key reasons why DeFi is rising in popularity.

What’s more, the stock market is only open for trading between certain hours, and the unit price of some stocks put them beyond the reach of investors with a small amount of capital, as you need to buy a whole number of shares. Bitcoin, on the other hand, can be traded around the clock, and it is fractional, so you can buy as little of it as you want.

Store of value

Many people choose to invest in Bitcoin as a way to store value, similar to Gold. Fiat currencies are subject to inflation, which means that their value in real terms gradually reduces over time.

Bitcoin, however, has a capped maximum supply of 21 million BTC. This supply can never be exceeded by design, and the vast majority of coins are already in circulation. The amount of new coins entering circulation in each block halves roughly every four years until the maximum supply is reached.

As new investors join the Bitcoin market, the cryptocurrency holds its value much better than fiat currencies, making it a popular asset for long-term investment plans such as retirement funds.

Decentralization

Bitcoin’s decentralization is one of the aspects that has made it so popular with users. As it runs on a peer-to-peer network, anyone can send value to anywhere in the world, without the process being slowed down or made more expensive by intermediaries.

Also, anyone can get involved with the operation of the network by becoming a Bitcoin miner. There is no central authority like a bank or government running the network. This means that authorities have no power to stop Bitcoin or make any decisions about the coin’s economics.

The economic rules of Bitcoin are already hard-coded into the system. Anyone can look up Bitcoin’s supply, and the public distributed ledger provides a transparent and unalterable record of all transactions. Bitcoin’s decentralization means there is no single point of failure, so the cryptocurrency is secure by design.

Earn interest

When you deposit your money into a savings account at a bank, the interest rate offered is lower than inflation, meaning that in real terms, your savings lose value over time.

As well as Bitcoin being a good asset for preserving value in the long term, a growing number of platforms offer Bitcoin savings accounts, enabling you to grow the amount of Bitcoin you hold.

This is simple to do, as it generally only takes a couple of clicks to transfer your BTC to a savings account. Furthermore, the interest rates offered on Bitcoin savings accounts are much higher than those provided by traditional savings accounts. Binance , for example, offers an estimated APR of 5%.

Reasons not to Invest in Bitcoin

Volatility

Bitcoin, and cryptocurrencies in general, are far more volatile than traditional financial assets. Its price can suddenly rise or fall by a significant amount in a very short period of time, meaning that crypto investors need a higher risk tolerance than other investors.

This can, understandably, put off new investors, as any investment they make could potentially be worth significantly less the next day. The major crashes that signal the start of long-term bear markets can easily see Bitcoin’s price fall by more than 70% in a matter of months.

Watching these fluctuations happen in real time can cause some investors anxiety. Anyone thinking of investing in Bitcoin should familiarize themselves with its price history, so they know what kind of volatility to expect. They should also only invest money they could afford to lose, and be prepared to hold their Bitcoin for a long time to ride out bear markets.

Lack of Regulation

As cryptocurrencies are a relatively new technology, most regulators around the world are still catching up. This means that there isn’t the same level of diligence and protection that there is in other sectors.

As Bitcoin itself is decentralized and unregulated, in most countries, if you lose your BTC due to a hack, scam, or anything else, you will have no recourse to claim compensation. This is a marked difference from the stock market, where retail investors generally have some kind of consumer protection.

Many countries are starting to regulate cryptocurrency service providers, like crypto brokers and exchanges. However, there are plenty of unregulated crypto platforms, and using them could put you and your funds at risk.

Risk of Losing it

As Bitcoin has so much profit potential, Bitcoin users and platforms can be a target for a variety of criminals. Hackers may try and exploit insecure wallets or exchanges to steal Bitcoin. The best way to avoid this is to keep your coins somewhere secure, like a Trezor or Ledger hardware wallet.

You may receive phishing emails that appear to be from your platform or crypto wallet but are, in fact, from criminals trying to gain access to your account. You should never give up your private key or password to anyone, and legitimate emails will never ask you to.

If you keep your BTC in a private wallet, you should keep the password and seed phrase somewhere safe, as if you lose them, you won’t be able to access your wallet and retrieve your coins. Also, take extra care when transferring your BTC between wallets. If you enter the wrong address or send your coins using a network that isn’t supported by the receiving wallet, your Bitcoin could be lost forever.

What to know before buying Bitcoin

Where to Buy Bitcoin

Before you can buy Bitcoin, you’ll need to decide where to buy it from. The safest and most convenient option is to buy Bitcoin from a regulated online crypto platform. It’s usually quick to sign up, and then you can make instant purchases and access a range of features.

Platforms may differ in the tools, altcoins, fees, and security they offer, so it is useful to do some research before you choose one. We provide reviews of some of the best and safest crypto platforms to help you find the one that’s right for you.

Bitcoin fees

Before buying Bitcoin, it is useful to know which kinds of fees you may encounter and how much they are likely to be, as this could affect which platform you decide to use and how and when you invest.

Platforms generally charge a fee for deposits and/or withdrawals. There will also probably be a fee for each purchase or sale you make. Some platforms may have other fees, such as for account management or inactivity. You can aggregate all these costs to work out which platform is the cheapest to use.

If you want to transfer your BTC to or from a private wallet, you will need to pay a Bitcoin transaction fee for using the Bitcoin network. The size of this fee fluctuates and can be very high when a lot of people are using the network. This might make it prohibitively expensive to transfer small amounts of BTC.

Dollar Cost Averaging

An important consideration before buying Bitcoin is what kind of strategy you’re going to use. If you don’t have a strategy when you start buying Bitcoin, you’re more likely to end up winging it and potentially make poor decisions.

Dollar cost averaging is one of the simplest and most popular Bitcoin investment strategies. You simply make small purchases of BTC at regular intervals, regardless of price. This is ideal for long-term investors who believe that the price of Bitcoin will ultimately rise. You can easily set up an automated dollar cost averaging strategy with the recurring buys feature on Coinbase .

Is Now a Good time to Buy Bitcoin?

Traders and shorter-term investors who don’t want to use a dollar cost averaging strategy may want to buy Bitcoin when its price is low and/or about to rise. This is impossible to predict with total accuracy, but the factors below may help you find good buying opportunities.

Market Cycles

A major factor when it comes to Bitcoin’s price is long-term market cycles. If you look at the price history of Bitcoin, you will notice a pattern of bull markets culminating in dramatic surges to new all-time highs, followed by bear markets that start with a crash that is just as sudden and significant.

This pattern repeats roughly every four years (it could be influenced by Bitcoin halving events, which also happen roughly every four years). The past is no guarantee of what will happen in the future, but many believe that this established four-year pattern will continue.

Bitcoin News

When Bitcoin is discussed in the news and on social media, it can raise awareness of the cryptocurrency, increase hype, and lead to a flurry of new investors, potentially raising the price of the coin.

Bitcoin may make the news due to recent dramatic price action or because it has been discussed by a celebrity. There is also project news that can affect Bitcoin’s market sentiment, such as upgrades to the network.

Institutional Investment

In recent years, a number of institutions have started buying Bitcoin. If more institutions with large amounts of capital start to add Bitcoin to their balance sheets, this could increase demand for the coin, decrease the supply available on the market, and increase confidence in Bitcoin among retail investors—all of which are positive for BTC price.

As institutions have significant capital and resources for market analysis, retail investors may benefit from following their lead. You can find an up-to-date list of companies with Bitcoin holdings.

Is it too Late to Buy Bitcoin?

If you didn’t manage to invest in Bitcoin before its price hit its latest all-time high, you may feel as though you’ve missed the boat. But many would-be investors felt the same after the price peaks in 2013 and 2017, and clearly, it would still have been possible to make considerable profits since then.

Bitcoin’s price history is no guarantee of its price future, but many experts predict that this pattern of fresh bull runs and new all-time highs will continue in future market cycles.

What’s more, the crypto market is still relatively new. The vast majority of people don’t hold any Bitcoin, which means those who buy now could still be considered fairly early investors. As the crypto industry as a whole grows, and blockchain technology finds more applications, more and more people are discovering Bitcoin.

This growing adoption among retail investors, coupled with the newer trend of institutional Bitcoin investment, suggests that Bitcoin still has a lot of price potential.

How Much Bitcoin Should You Buy?

This is a personal question that depends very much on individual circumstances, such as your financial situation, experience, and strategy.

The most important thing when it comes to crypto is that you shouldn’t invest more than you can afford to lose. If you don’t have much spare capital, then you shouldn’t be making large investments.

When deciding how much to set aside for investing in Bitcoin, make sure you leave yourself more than enough money to live comfortably. You should also think about your longer-term spending plans, as any money you invest in Bitcoin could be tied up for years if you want to wait for the optimal selling opportunity.

If you’re totally new to crypto, it could be wise to start by only investing a small amount in Bitcoin while you develop your crypto knowledge and investment skills.

Following a specific strategy may affect how much Bitcoin you decide to buy. Some strategies may call for you to invest a certain percentage of your investment budget when a certain technical indicator gives you a buy signal.

People who follow a dollar cost averaging strategy tend to invest the same amount at regular intervals, such as once a month. If you opt for this strategy, you might decide to invest a certain percentage of your monthly salary, but you should make sure the amount you choose leaves you with more than enough income to cover living expenses.

Final Thoughts

There are a lot of aspects to think about when it comes to deciding whether or not to buy Bitcoin. Doing your own research is important and will help you gain a better understanding of what makes Bitcoin a good investment.

We’ve covered a range of other considerations, like timing, size of investment, and strategy. If, after reading this information, you decide that buying Bitcoin is the right choice for you, you can make a purchase in a matter of minutes by clicking on one of our top platform recommendations in the where to buy Bitcoin section.